Nomura Financials Conference 2011 Göran Bronner, CFO
This is Swedbank Market leading retail franchise in its home markets • Largest retail bank and fund manager in Sweden Market shares, May 2011 Market shares, May 2011 % % 60 60 Deposits Private Mortgage lending Deposits Corporate Corporate lending 50 50 40 40 30 30 20 20 10 10 0 0 Sweden Estonia Latvia Lithuania Sweden Estonia Latvia Lithuania Source: Source Sweden: Statistics Sweden (SCB) Source Estonia: Estonian Central Bank Sources Latvia: Association of Commercial Banks of Latvia (ACBL) & The Financial and Capital Market Commission (FCMC) Source Lithuania: Association of Lithuanian Banks (LBA) 2
This is Swedbank Sweden – the dominating home market • Around 87% of total lending is originated in Sweden • Estonia makes up 41% of total CEE lending SEKbn Private 979 1 000 948 Corporate 900 800 700 521 584 600 500 400 251 300 427 97 200 395 136 80 100 69 154 39 67 41 0 Q4 08 Q2 11 Q4 08 Q2 11 Q2 11 CEE Sweden excl Estonia 3
Balance sheet development Significantly reduced risk level since 2008 • CEE lending deleveraged by 46% • Limited senior funding need, no dependence on short-term funding Assets* Liabilities* 1 400 1 400 Central bank + Senior 1 200 1 200 Government -218 guaranteed CEE lending -116 -46 Estonia 1 000 1 000 Other corporate Covered lending, Sweden & bonds -63 other Nordic 800 800 +218 Other private, -12 Sweden 600 600 +11 400 400 Swedish +82 Deposits mortgage loans 200 200 Suppl. cap +11 Core T1 0 0 FY 2008 Q2 2011 FY 2008 Q2 2011 Q1 2011 FY 201X FY 201X FY 2008 Q1 2011 Source: Swedbank, Dec 31, 2008 and Jun 30, 2011 * Simplified balance sheet assets and liabilities 4
Funding Proactive funding creates flexibility • SEK 587bn term funding issued Term issuance & maturities since Q3 2009 (nominal SEKbn) Q3 2009 – YTD (30 Aug 2011), and 120 maturities of SEK 386bn 100 • Average maturity of wholesale funding*, 80 34 months (42 months for covered 60 bonds) 40 • Long-term funding issuance in the first 20 half of 2011 totalled SEK 153bn, with 0 maturities of SEK 79bn during the same period -20 -40 • H2 maturities of nominal SEK 80bn, -60 of which government guaranteed debt SEK 46bn -80 -100 -120 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 * Based on all debt securities in issue, long-term and short-term. For subordinated debt, maturity dates are assumed to be next call date. 5
Liquidity Conservative liquidity levels • Conservative liquidity Conservative liquidity levels reserves to match temporary Additional liquid securities Long-term debt securities larger maturities outside Group Treasury in issue maturing in the next 12 months • No dependence on short-term SEK 65bn SEK 180bn funding • USD balance sheet well matched Liquidity reserve according Outstanding short-term to SFSA definition debt securities in issue SEK 203bn SEK 94bn 6
Capital management Buy-back program continues • CT1-ratio to stay above 13% 2011-2012 14.8% • 4.56 per cent of total shares Excess capital (SEK 9.2bn) repurchased as per 30 August 13.0% Extra buffer due to prevailing • Stress tests support low risk circumstances (SEK 15.3bn) 10.0% level Risk appetite – ICAAP 2011 (ICAAP buffer, SEK 15.3bn) – EBA 7.0% • Continued focus on capital Minimum efficiency requirement (SEK 35.7bn) 7
Solid Q2 performance • Net profit of SEK 3 452m • Core Tier 1 capital ratio of 14.8 per cent after buy-backs • Return on equity of 14.4 per cent in Q2 Profit performance Profit for the period Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 8
Expenses On target with flat costs • Lower number of employees • Bank accounting principles in Ektornet increase expenses 0.58 0.57 0.55 0.52 0.52 4 590 4 423 4 384 4 345 4 238 T otal expenses Cost-income ratio (SEKm) Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 9
Swedbank’s actions in current market situation • Reassessment of – Equity collateral – Exposures towards banks and financial institutions – Collateral documentation • Increased focus on funding market development – Swedish banks has a strong relative position • Started to develop cost continuity plans if income weakens by market sentiment 10
Appendix 11
GIIPS exposure, 30 June 2011 GIIPS exposure, 30 June 2011 SEKm Greece Ireland Italy Portugal Spain Total Bonds 51 2 243 27 20 343 of which soveriegn 51 234 27 10 322 of which held to maturity 1 51 102 27 6 186 Loans (money market and certificates) 330 303 633 Loans (committed credit facilities) 0 Derivatives net 2 14 43 57 Other 3 16 59 10 89 174 Total 67 16 632 37 455 1 207 1 Actual market values are below the carrying amounts by approximately SEK 51m. 2 Derivatives at market value taking into account netting and collateral agreements. Considering the bank's internal risk add-ons for counterparty risk at potential future change in prices, the derivative exposures amount to: Greece SEK 72m, Italy SEK 437m and Spain SEK 196m. Total SEK 705m." 3 Trade finance and mortgage loans. 12
ICAAP 2011 – adverse scenario Scenario: “Eastern slowdown – Western standstill” Triggers Outcome Sweden • Chinese housing market collapses • Negative GDP for three consecutive years, 2012- • The export led recovery in the US halts as 2014 (a drop of 7% relative 2011) Asian demand dries up • Unemployment rate rises from 8.4% in 2010 to • US protectionism and US economic 16.9% in 2014 pessimism turns world growth negative • Residential real estate price drop of 33% until 2014 • US enters into a “Japanese” scenario • Swedish krona strengthens 31% against the USD • A weak EU is severely hit by falling • Interest rates remain low (treasury bill rate of 0.3%) demand in China and the US Adverse scenario 2011 - GDP development Baltic countries 120 • 30% devaluation in Latvia and Lithuania early 2012, GDP index (2010=100) 115 Estonia affected by contraction of external demand Sweden, base case 110 Sweden, adverse • 105 Negative GDP growth in all three countries during US, base case 100 2011-2014 (drops of 9%-11% relative 2010) US, adverse 95 • EU-27, base case Unemployment rates peak in 2013-2014: EE 19.5%, 90 EU-27, adverse LV 21.5%, LT 20.0% 85 • 80 Residential real estate price drops. Trough in 2014 2010 2011 2012 2013 2014 2015 2016 EE -24%, LV -15%, LT -21% 13
ICAAP 2011 – adverse scenario Scenario model results Total Income statement (SEKm) 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2011-2016 Profit before impairments 12 485 13 233 13 766 7 666 7 287 7 150 7 610 56 712 Credit impairments 3 005 5 972 19 318 15 359 10 231 6 734 4 290 61 904 Profit for the year 7 084 5 033 -5 696 -7 694 -2 944 146 1 971 -9 184 (SEKm) 2010F 2011F 2012F 2013F 2014F 2015F 2016F Risk-weighted assets, 541 327 519 839 524 279 464 569 434 894 413 542 399 855 full Basel 2 Core Tier 1 capital 75 470 77 815 69 084 55 936 52 981 53 069 54 043 Core Tier 1 capital ratio, % 13.94 14.97 13.18 12.04 12.18 12.83 13.52 • Core Tier 1 capital ratio troughs in 2013 • Low interest rates combined with lending volume decline during the scenario period decrease NII and risk-weighted assets NB: Not adjusted for the buy-back programme or any additional regulatory changes. 14
ICAAP 2011 – base scenario and adverse scenario Macroeconomic assumptions Sweden Baltic countries GDP growth GDP growth 120 140 130 110 120 100 110 100 90 90 80 80 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 e e Unemployment Unemployment 20% 20% 15% 15% 10% 10% 5% 0% 5% 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 Sweden, base case Sweden, adverse Real estate price index Real estate price index 110 150 140 100 130 90 120 110 80 100 70 90 80 60 70 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 e e Estonia, base case Estonia, adverse Sweden, base case Sweden, adverse Latvia, base case Latvia, adverse Lithuania, base case Lithuania, adverse 15
Loans past due 60 days – performance Q/Q -150 -100 EURm 100 150 200 250 -50 50 0 Q2 10 Q3 10 Estonia Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Latvia Q1 11 Q2 11 Q2 10 Q3 10 Lithuania Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Ukraine Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Russia Q4 10 Q1 11 Q2 11 16
Real estate prices Tallinn Riga 1 800 2 000 1 762 1 616 1 800 1 600 1 600 1 400 1 400 1 200 915 1 200 1 000 1 000 800 601 800 600 600 400 400 200 200 0 0 May-05 May-06 May-07 May-08 May-09 May-10 May-11 Mar-06 May-07 Feb-09 Apr-10 Jan-05 Sep-05 Jan-06 Sep-06 Jan-07 Sep-07 Jan-08 Sep-08 Jan-09 Sep-09 Jan-10 Sep-10 Jan-11 Jan-05 Aug-05 Oct-06 Dec-07 Jul-08 Sep-09 Nov-10 Jun-11 Nr.of deals EUR/m2 Nr.of deals EUR/m2 Source: Swedbank, Estonian Land Board Source: Swedbank Vilnius 2 000 1 731 1 800 1 600 1 400 1 074 1 200 1 000 800 600 400 200 0 Jan-05 Aug-05 Mar-06 Oct-06 May-07 Dec-07 Jul-08 Feb-09 Sep-09 Apr-10 Nov-10 Nr.of deals EUR/m2 Source: Swedbank, State Enterprise Centre of Registers 17
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